The Relationship Between Political Connections And Corporate Over-investment

Since the PV industry of China took off in1985, the industry has gone through a huge change from booming up to falling down. And over-investment should be one of the main reasons for this change. PV industry, as one of China’s high-new-industries, has been in close with the China’s government which always gives support to it. Therefore, it is meaningful to study the PV industry on the view of government behavior.The point of contact of this paper is the correlation between over-investment behavior of executives and political associations, takes PV in Jiangsu province as a case study and the quarterly data of PV enterprises listed as samples. This paper uses LOGIT regression model to analyze the data, and the result of the analysis shows that over-investment level significantly being relevant with executive politics associated, namely political associate severely affects the over-investment. Besides, the state-owned PV enterprises are also significantly relevant with executive politics associated while the non-state-owned PV enterprises show no significant relevance.